JobSeeker boost hasn’t impacted the rates of people seeking work, economists say

Community groups are strongly opposed to the government’s planned cuts to the JobSeeker payment              

The higher rate of JobSeeker during the coronavirus pandemic has not created a disincentive for welfare recipients to find work, leading economists have told a Senate inquiry.

Economist Jeff Borland and social policy expert Professor Peter Whiteford presented evidence to the Senate community affairs legislation committee on Wednesday showing that while the rate of people finding employment plateaued at the start of the pandemic, it returned to normal levels once the economy reopened mid-year.

It comes amid debate over plans to reduce the Morrison government’s coronavirus supplement, which was originally set at $550 per fortnight in March, but was reduced to $250 in September and will fall to $150 at the end of December.

Prime Minister Scott Morrison said earlier this month that keeping the current supplement rate would “hold Australia back”.

The Coalition and some business groups argue that keeping the elevated payment rate – which pushed income support above the poverty line for the first time in years – will dissuade welfare recipients from seeking employment. 

But Borland and Whiteford said their research has shown there is no evidence that the coronavirus supplement has had any appreciable effect on incentives to take up paid work. 

Whiteford noted that even with the supplement, Australia was still slightly below the OECD average for income support payments. Without it, payments will again be about the third-lowest in the OECD – and roughly 40 per cent of the minimum wage.

“So that means that, if you’re able to get a full-time job, you would have increased your income by two and a half times. That is an extremely high incentive,” Whiteford said.

“If the level of JobSeeker was the same as the level of the age pension, you’d be getting about 65 per cent of the minimum wage. So you’d still increase your income by more than half by getting a job.

“It’s pretty clear that, even at the level of the age pension, there are very strong incentives for people to get jobs that will help them to meet their previous financial commitments, particularly in relation to housing.”

Borland added that there were strong arguments for making a permanent increase to the JobSeeker payment.

“What COVID has done is give us a stronger evidentiary base for thinking that you could make that permanent increase without having significant adverse effects on the incentives to find work,” Borland said. 

Community groups have long called for an increase to the JobSeeker payment (formerly Newstart), which hasn’t been permanently increased above the rate of inflation since 1994.

Australian Council of Social Service CEO Dr Cassandra Goldie said the government’s plan to reduce the supplement at the end of the year would make a difficult festive period even harder.

She said income support recipients needed the security of knowing that they will be able to cover the basics in order to rebuild their lives.

“This is why we need a permanent increase to the base rate of JobSeeker of at least $25 a day more than the old Newstart rate so that people can cover the basics – housing, food, bills, and transport,” Goldie said.

“This would bring the payment only just above the poverty line, but closer to the pension rate, as it used to be. As we rebuild from the crisis, we can’t turn our back on those who are at risk of being left behind.”

Anglicare Australia’s executive director Kasy Chambers added that these cuts would plunge hundreds of thousands of Australians – and over one million children – into poverty.

She said the government can still choose to give people a pathway out of poverty.

“People will be recovering from this pandemic for months and years to come. They need certainty. That means a permanent increase, not more cuts,” Chambers said.

“It’s time for the government to raise the rate for good, instead of leaving people behind.” 

The ALP and The Greens have already backed a permanent increase to Newstart and have vowed to keep up pressure on the government to raise the rate.